Don’t wave goodbye to $1 bills just yet

A Federal Reserve study released Thursday tries to throw cold water on a push for replacing the old familiar green paper $1 bill with a $1 coin.

A recent study by advocates of the switch, the Dollar Coin Alliance, estimated eliminating the $1 bill would save taxpayers $13.8 billion over 30 years. The group includes metals companies and vending machine operators.

Not so fast, the Fed said. Actually, replacing $1 notes with $1 coins could cost about $1.2 billion over the next three decades.

The independent Government Accountability Office is in the middle, saying that the government could save $4.4 billion over 30 years. The Fed study notes that the GAO estimate of savings has been declining over the years.

The Dollar Coin Alliance cries foul. They think the Fed isn’t independent on the issue because the central bank would stand to lose out in the switch.

It’s true that the Fed handles production of dollars while the U.S. Mint handles the production of coins.

The two sides are locking horns over hot topics like “note life,” “coin life,” and “substitution effect.”

Another issue under debate is the tricky subject of “seigniorage,” or the difference between the value of money and the costs to produce and distribute it.

“The Fed earns billion is profits each year from paper currency, only a portion of which they return to Treasury,” said Shawn Smeallie, executive director of the lobbying group.

The Fed study cheekily points out that $1 coins are already widely available but little used.

Believe it or not, there is an estimated $1.4 billion of $1 coins already in the vaults of Fed District Banks.

Public awareness campaigns to encourage their use have generally fallen flat, the central bank noted.

Another concern is counterfeiting, the Fed said. Neither the Fed nor the U.S. Mint has “infrastructure” to ensure authenticity of the coins.

U.K. authorities have seen a substantial increase in counterfeiting of one pound coins in recent years with about 2.8% of all coins in circulation in the country possibly tainted, the study said.